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Divorce - Not a Ticket Out of Credit Card Debt

By John Rasor

Republish: EasyPublish™
Published: 11May2009
Word count: 500
Viewed: 229 time(s)

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Money, as you know, is a major cause of divorce. One spouse is responsible, the other is a spendthrift. The couple gets in over their heads and the responsible spouse decides to get out and stop living under that burden.

He or she may breathe a huge sigh of relief when a judge decrees the ex-spouse responsible for the debt - but it doesn't end there.

If you and your ex-spouse are joint holders of those credit cards, you remain just as responsible in the eyes of the issuer as you were before the divorce.

How can this be?

Because you signed a legal contract - and that contract has nothing to do with being married or divorced. You are an individual, and you are responsible for your contractual obligations, no matter what the judge says.

If your ex-spouse refuses to take responsibility, the only way that divorce decree will help you with the creditor is if you take him or her to court.

Have you ever noticed that you and your spouse each have a credit file and each have different credit scores, even though all of your financial transactions have been done jointly?

If you and your ex-spouse want / need to sever your financial ties, you need to close all your joint accounts. If you're carrying a balance, first open new accounts in your individual names and transfer the amount of debt that's "yours" to your new accounts.

In addition, if you had cards before your marriage and added your ex-spouse as an authorized user, you need to have him or her removed. This is to benefit both of you.

If you hold the card and your ex-spouse is the authorized user, he or she could run up debt that you would be responsible to pay. Conversely, if you are named as a user on your ex-spouse's card, any late payments will show up on your credit report.

This comes under the category of "piggybacking," a practice that allows card holders to add someone as an authorized user in an effort to help them build a credit score. Parents often use it to help children who are just starting their financial lives. It's wonderful if the card holder always pays on time - but terrible if the account is in default.

You may have heard that "piggybacking" was no longer used - and that's right. FICO stopped factoring authorized user status into credit scores for a few years, but it is now back.

If your ex-spouse refuses to remove you from authorized user status, you can file a "not mine" dispute with the credit bureaus. But remember, it could take 30 days or more for them to take action. So if it needs to be done, don't wait until you need good credit.

If you haven't looked at your credit report since your divorce, order it today. If changes need to be made, now is the time to make them - not later, when you might need your credit.

http://www.creditscorecowboy.com is the #1 source on the planet for a free credit report, identity theft software and a blog with a wealth of information writtten by lending professionals that know about credit and what determines ones creditworthiness.

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